How much does gas need to cost for hybrids to pay off?

2016 Hyundai Sonata Plug-in Hybrid

David Booth, Driving

When would be the best time to buy a plug-in hybrid? When gas prices reach $5 a litre

by
David Booth | February 12, 2016

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Last week, the price of gas slid below 70 cents a litre. Oh, that was only in Alberta, and consumers in higher tax constituencies — stand up and take a bow, British Columbia and Quebec — were still paying more than 90 cents a litre. But, nonetheless, across the country motorists are enjoying the cheapest gas since 2008.

And how are we celebrating? By buying more pickups. Yes, thanks to cheap gas, Ford essentially quintupled its net profit to US$7.4-billion on the back of increased F-150 sales. Ditto General Motors, which made even more money, largely as a result of trucks sales. Not to be outdone, Fiat Chrysler has decided to abandon Dodge Dart and Chrysler 200 production (they’ll be outsourced) so they can pump out more Jeeps and Rams. In the land of cheap gas, guzzlers are king.

What has suffered is the sales of hybrids and EVs, consumers seeing little reason to pay their higher initial cost for so little fuel-sipping payback. Sales of plug-ins are down in the United States by some six per cent, while here in Canada, DesRosiers Automotive Consultants says hybrid sales have plummeted about 32 per cent since their peak in 2012. Things are so bad, says Automotive News, that Toyota may scale back its Prius lineup.

Why?

2016 Hyundai Sonata Plug-in Hybrid

The reason is simple dollars and cents, Automotive News decrying electric cars’ “steep buy-in compared to increasingly efficient gasoline-powered economy cars.” The always quotable Bob Lutz, former GM vice-chairman, said it even better: “If gasoline was $8 a gallon, consumers would amortize the costs of an electric vehicle pretty quickly … but at $1.50 a gallon, who is going to be willing to pay an $8,000 or $10,000 premium?” In other words, for cost-conscious consumers, it’s all about how long it takes for the savings in fuel costs to pay back the initial premium automakers charge for hybrid, plug-in and electric vehicles.

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Ever curious, Driving decided to compare the long-term operating costs of some hybrids with their equivalent gasoline-powered siblings. How long would it take for a hybrid or plug-in to pay off its higher MSRP? How much would you save compared with a similar gasoline-fueled vehicle, and exactly how many years would it take to pay off their higher sticker prices?

To find out we used Transport Canada’s estimate of annual running costs as a guide and focused on the two traditional family sedans — the Hyundai Sonata and the Ford Fusion — that offer both hybrid and plug-in hybrid variants. The results were, to say the least, interesting:

On the (semi) positive side, the Ford Fusion Hybrid’s fuel savings would pay off its premium in “only” about 7.4 years. At 8.9 years, Hyundai’s Sonata Hybrid wouldn’t take much longer.* Not exactly frugal, but, still, a bordering-on-realistic time frame.

The 2014 Ford Fusion Hybrid, similar to this 2013 version, gets a new trim level, the S, which will drop the price $28,699.

Not so, it seems, when upgrading from regular hybrids to their plug-in counterparts. Moving up from the Fusion Hybrid to the plug-in Fusion Energi, for instance, would take a whopping 30 years to pay off. Upgrading to the plug-in version of the Sonata from the base hybrid, by comparison, looks relatively efficient but would still take about 18 years to pay off its $6,500 uptick compared with the garden-variety Sonata Hybrid.

And that’s using Transport Canada’s estimate that fuel will cost an average of $1.09 a litre. Factor in a more au courant $0.90 a litre and the numbers look worse. The Fusion Hybrid’s almost-reasonable payback gets extended to a not-as-realistic nine years; the Sonata Hybrid would take 11. The plug-in versions of both? Something like 35 and 20 years, respectively.

OK, that’s not realistic. So, then we thought, if today’s rock-bottom gas prices make time-conscious payback unrealistic, what would gas prices have to be to pay off the premium in a reasonable amount of time? By reasonable, we — assuming consumers are an impatient lot — chose four years. In other words, what would the price of gas have to be for an electrified car to pay off its premium in 48 months?

2016 Hyundai Sonata Plug-in Hybrid

The Fusion Hybrid was still the winner, of course, its break-even price about $2 a litre — roughly the $8 a U.S. gallon Lutz quoted — compared with the bare-bones 2.5-litre-powered Fusion S. Scary, yes, now that most of us are paying less than a buck a litre, but 12 short months ago, pretty much everyone reading this article assumed gas would soon be $2 a litre. At $2.45, upgrading to the Sonata Hybrid from the base 2.4-litre version required a little more pain at the pump, but it wasn’t egregiously worse.

Things get seriously ugly, however, when you consider justifying the premiums for the plug-ins. Even factoring in their ability to drive on electricity alone — 41 kilometres in the Sonata Plug-in’s case — gas would have to be as much as $5 a litre for the Ford or Hyundai plug-ins to break even after four years to warrant their premiums over the regular hybrids. Even those who still believe “peak oil” is a thing have never dreamed of such cringe-inducing gas prices.

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One interesting anomaly in these comparisons is that the higher one goes up the automotive food chain, the easier it is for automakers to absorb the approximately US$200 per kilowatt-hour a lithium-ion battery costs. A price-conscious Ford or Hyundai can’t afford to absorb the $2,000 for a typical plug-in battery, but a luxury automaker can easily defray the investment. So while lesser plug-ins — even BMW X5 xDrive40e! — require about eight years to amortize, Porsche’s Cayenne S E-Hybrid justifies itself in just 3.5 years. Moving farther up the food chain, Porsche prices its Panamera S and Panamera S E-Hybrid exactly the same — $106,600 — despite the plug-in’s 9.4 kWh battery and $1,028 reduced annual running costs. And so eager is Mercedes-Benz to boost its hybrid sales — to reduce its corporate average fuel economy — that its S550e actually costs less ($117,300 versus $119,500) than the standard S550, the plug-in’s reduced running costs (about $1,500 a year) a further bonus.

I guess it’s like everything else in the world, the rich always get the better deal.

* Note that Ford’s quicker payback isn’t so much because its hybrids are more efficient — their overall fuel economy is about the same — but because the base Fusion S’s fuel economy, 8.9 L/100 km, is so much worse than the base Sonata GL’s 8.1 L/100 km that there’s more room for improvement.

How long does it take for a hybrid to pay off? We crunched the numbers.